January 12, 2004   |   Palo Alto   |   Andrew K. Reese — Essex Electrical Products, one of North America's top wire and cable manufacturers, is set to deploy a price optimization solution from Metreo in a bid to improve its pricing practices for increased sales force productivity and better customer satisfaction.

Nearly 70 years old, Essex today is a leading manufacturer of building and industrial wire, selling within the electrical distribution channel and to such major home improvement retailers as Home Depot, Lowes and Menards.

As a fast-moving, industrial-manufacturing business, Essex has needed a pricing process to facilitate quick, fact-based pricing decisions. But the company has labored for some time to improve its current process, according to Brad Thomas, vice president of sales at Essex. "We sell building and electrical wire," Thomas explains. "Unfortunately, it is pretty much treated as a commodity. So there are a lot of pricing issues involved in the entire process."

Over the years, Essex has looked at working with various consultants to improve its process, and the company had seen presentations by a number of different software providers. "And quite frankly," Thomas says, "nobody had the answer."

Thomas happened to sit in on a Web seminar put on by Metreo over a year ago and, after some follow-up phone work by the software provider to determine Essex's needs, elected to meet with the solution provider to get a clearer picture of what Metreo was offering. "And they really did have, maybe not a solution, but a systematic process to take us through our pricing analysis, our pricing assumptions and actually our pricing decisions," Thomas says.

Metreo says its Integrated Pricing Solution offers an integrated pricing application suite that ties price execution, analysis and planning. The goals of the solutions are to provide optimal prices that maximize business objectives in every segment, create an evaluation and decision framework for guided negotiation, and then adapt company pricing to changing business opportunities and customer buying behavior.

Eventually, the two companies agreed to undertake a pilot program to determine whether Metreo's solution could indeed improve Essex's margins. Currently the companies are defining the scope of the experiment, which Thomas expects to last two or three months and which will extend throughout Essex's business. "Right now, we've decided that's the only way to do it [in order] to get a fair and accurate assessment," Thomas explains. "We have too many pricing aspects of our business that are territorial, so you can't judge [the impact on the whole business] by just experimenting in just one or two territories."

According to Thomas, Metreo's willingness to prove its solution's impact by going through this type of pilot was a key factor in convincing Essex to move ahead with the project. "Metreo was the only software company that we've talked to that put a little meat behind their expectations," Thomas says.

Essex was impressed by the solution's ability to take the "human element" out of the pricing process, according to Thomas. "It takes the human emotion out of pricing decisions," he says. "What we have today is totally a manual-driven process that's based on a lot of gut reaction, a lot of responding to the 'now'."

The solution will let the company collect all the data needed to make pricing decisions into a central repository, which in and of itself will provide benefit, Thomas believes. "Just gathering all that data gives the company information at our fingertips so that people can spot trends, whether it be within a given market, within a territory or with certain customers."

Essex is counting on that kind of intelligence to provide the company's staff with valuable insights and a better ability to make more profitably pricing decisions. "You're making better decisions and not necessarily leaving money on the table," Thomas says. "We're trying to win, as they say, the best business."

Thomas says that if Essex goes ahead with an implementation following the pilot, the company will be looking for a margin improvement of around 1 percent — not a high figure, but given the volumes that Essex produces, it could wind up being a significant amount of cash.

But Essex is also looking to the solution to help extend its pricing processes further out into the field: whereas at present the company has just a handful of people making pricing decisions, if Essex moves forward with the Metreo solution, eventually between 30 and 50 people could be using the system.

"It allows us to take the decision-making process out into the field, give it to our sales network, our salespeople," Thomas says. "It'll be much closer to our customer, and much quicker for our customer." And that, of course, could help the company improve its customer satisfaction, providing another boost for the manufacturer.